Incomes Are Rising in Most States, Yet Inequality Isn't Improving

The nation's median household income rose 2.4 percent last year, with significant increases in 30 states.

Americans' incomes continued trending upward in 2016, according to new U.S. Census Bureau estimates released on Thursday. That’s good news for employees, local economies and governments that rely on income tax revenues. But despite the bigger paychecks, inequality has not improved.

Nationally, median household incomes ticked up 2.4 percent after adjusting for inflation, marking the fourth consecutive significant increase in the Census Bureau's American Community Survey (ACS). In all, real incomes rose in 46 states last year, with the increases in 30 states enough to be considered statistically significant.

Idaho recorded the strongest growth, with incomes up 6.3 percent from 2015. The state also had the largest percentage increase in jobs last year as construction, agriculture and financial services propelled its economy. Not too far behind were Massachusetts, where incomes increased 5.8 percent, along with Oregon (5.1 percent) and North Carolina (4.5 percent).

Louisiana, on the other hand, recorded the largest decline (-2.1 percent), likely due in large part to its struggling energy sector. The other states where incomes shrunk were also energy industry states: North Dakota (-.5 percent) and Wyoming (-1.1 percent).

2015-2016 Real Income Change
SOURCE: U.S. Census Bureau, 2015 and 2016 American Community Surveys. Figures shown in 2016 dollars.
The state with the highest income was Maryland, where the median household income in 2016 was $78,945. Coming in second place was Alaska, which surpassed the District of Columbia and Hawaii and registered a median income of $76,440.

The poorest states, meanwhile, were mostly clustered in the South: Mississippi ($41,754), West Virginia ($43,385), Arkansas ($44,334) and Louisiana ($45,146).

Earlier this week, the Census Bureau released separate national estimates from its Current Population Survey (CPS), which includes a broader set of potential income sources and covers a slightly different time period than the American Community Survey. Results from that survey painted a somewhat rosier picture, with median household incomes up 3.2 percent last year.

One major caveat to the income gains is that they have done little to improve inequality. As part of the ACS, the Census Bureau publishes a Gini index, where higher values represent greater income inequality. By this measure, most states saw little change last year.

But over the longer term, income inequality has intensified across nearly all states. Since the 2006 ACS survey, the national Gini index has climbed 3.9 percent. States with the largest increases over the decade include Montana (9.6 percent), Rhode Island (8.1 percent) and Vermont (8.1 percent). Alaska was the only state where the Gini index declined.

Changes in State Income Inequality

The Census Bureau's Gini index approximates income inequality. It uses a scale of 0 to 1, where higher numbers represent greater inequality. Nationally, the index has increased 3.9 percent over the past decade.